“IoT Lights up the Dark” – How Munich Startups Are Involved

The Internet of Things, abbreviated to IoT, is something everyone is talking about. How strong is IoT in Munich? And how is it developing in Germany? Munich Startup went to find out.

To begin with, the term should be defined, since not everyone has the same understanding of the Internet of Things. Broadly speaking, the term refers to the networking of devices, sensors, etc. through shared interfaces. IoT is based on intelligent objects. These smart objects’ original function has been augmented by the addition of integrated sensors, microprocessors or network adapters.

We would like to look at two areas of the Internet of Things that are of equal importance for Munich: Industry 4.0 and also the consumer arena, which includes smart homes and wearables.

In Industry 4.0, smart objects are linked with embedded systems. These are compact computers that are built into other technical systems (automobiles, manufacturing equipment) where they control various functions. The term Industry 4.0 has been strongly influenced by Germany and describes the continued automation and individualization of production processes using IoT technologies. The term is hardly known outside of Germany, where the term IIoT, or the Industrial Internet of Things, is more widely used instead.

In the field of B2C, digitalization is becoming a part of private life, be it in the form of a smart home, connected cars or wearables such as fitness trackers or smartwatches. These devices are also networked with the aim of increasing comfort, information and safety, or of saving energy.

Of course there are also “smart city” applications that are used to revolutionize companies, management and private life. One aspect is indisputable: IoT will radically change our lives and economies.

More networked devices than people on earth

According to forecasts, there will be more than 20 billion networked devices by 2020. The IT research company Gartner maintains that 5.5 million devices are being added daily. After all, hardly any modern device comes without an internet connection these days. In addition to wearables and smartphones, devices such as printers, webcams and even cars and toasters are being connected to the net.

Marcus Köhler, founder of the Munich-based startup comfyLight is certain:

“IoT will influence our lives much more significantly than the traditional internet. If for no other reason, it is because there are now more interlinked devices than there are people on earth.”

The disruptive change ushered in by the IoT-driven “fourth industrial revolution” affects not only business models and company strategies, but also employee skills and society as a whole. However, the technology can’t always keep up: although it now costs less to manufacture sensors, power supply and battery storage have yet to be sufficiently developed. The same is true for data transmission. The bandwidth is often not sufficient to transmit high-resolution data. A lack of data evaluation might be another sticking point. On the same note, companies are not able to find enough competent employees or young talent. It all leads to major challenges.

How German industry deals with IoT

Only one third of international senior executives see themselves in a position to safely steer their companies through the disruption caused by Industry 4.0. This was revealed in early 2018 by the global “Industry 4.0 Readiness Report” by Deloitte. Another study by EY and Bitkom on “Industry 4.0: Status Quo and Perspectives” (Industrie 4.0 Status Quo und Perspektiven) revealed that not even half (45 percent) of the companies in Germany had worked with IoT solutions in 2017. Nevertheless, that does mean a four percent increase compared to 2016, and an additional 43 percent are planning or discussing the use of IoT. Yet these results demonstrate that there is still a lot of room for improvement.

Markus Reichenberger, an internet pioneer and the founder of neu.de, now active in digital business development as the CEO of the company minnt, sums it up well:

“The challenge is that products that no one had even considered before are suddenly becoming ‘intelligent.’ That requires SMEs, which have a high degree of professional expertise but not much IT experience, to develop an IoT strategy. Many will fail to do so — and new companies will emerge.”

Dynamic Components founder André Leimbrock added that IoT will only bring radical change for the industrial sector when the challenges already named are overcome. Leimbrock said:

“IoT can only be successful if the use of its technologies is not an end in itself. Either new business models will need to be found that increase or stabilize sales, or costs will need to be cut.”

German Concerns

Despite all the opportunities, there is also some concern: hackers might virtually make their way into children’s rooms, our cars or offices, or bring entire manufacturing chains to a halt. This points to a significant challenge presented by the Internet of Things: the subject of privacy and security – the German newspaper Süddeutsche Zeitung provides an in-depth account of potential risks. German manufacturers are more cautious than others. According to the Fraunhofer Institute for Applied and Integrated Security AISEC, many entrepreneurs are responding with uncertainty, and the need for IoT security training has increased rapidly.

“IoT devices are the foundation for complex applications and business processes, yet they are often vulnerable to attack. Insecure configurations and a lack of control result in many devices being manipulated by malware. If companies use the data from these devices in their processes, the consequences can be disastrous.

commented Viktor Deleski, Head of PR & Marketing at AISEC. From the perspective of the research institute for IT safety and cyber security, it is the safety and trust in the devices that is the main difficulty with IoT.

When it comes to consumers, they are often unaware of security issues in some areas, particularly when convenience trumps worries about security. That being said, German consumers are not as far along as IoT suppliers would like in many areas of the consumer realm. So far, networked objects have not been as widely accepted by B2C customers as hoped.

Yet according to a study published in 2017 by Deloitte, things are starting to turn around: the number of consumer IoT devices has increased considerably. The most popular current smart devices are fitness trackers and smartwatches. How did that turnaround come to be?

“The three large smart home platforms and language assistants from Amazon, Google and Apple are receiving a large amount of attention at the moment. That really helps in marketing smart applications.”

Another challenge – particularly in the smart home area – is actually having the various devices work together seamlessly and effectively. That is often not the case, since devices from different manufacturers do not share the same standards. Early adopters have a sense of humor about it. For those who would like to learn more, the hashtag #Internetofshit is a recommended destination.

The benefits of IoT

Aside from all the challenges – what benefits does IoT have to offer? An almost poetic answer was given by Andreas Kunze, founder and CEO of Konux:

The concrete benefits offered by IoT in the industrial sector are in process optimization and increased economic efficiency. The potential in these areas is enormous. An important factor is not only the continuous collection of data to create a digital image of industrial processes, but also the targeted and intelligent analysis of data. This could result in the development of new business models in the area of data exchange.

The Munich startup ProGlove, for example, concentrates entirely on the subject of process optimization with its wearables for the industrial sector. By doing so, the company makes logistics and production process more efficient. Why have they chosen to focus specifically on this area? CEO Thomas Kirchner explained:

“In industry, it is always a matter of achieving high quality as efficiently as possible with as few resources as necessary. We feel certain that this technological leap has the potential to improve efficiency, quality and flexibility by a factor of 10.”

Creating digital factory twins

The Munich-based startup blik on the other hand, has specialized in offering data for logistics and production processes. COO Philip Eller has noticed that an increasing number of companies are recognizing the advantages offered by comprehensive data collection. The trend is heading toward creating digital twins of processes, factories or even of entire supply chains. Nonetheless, many industrial companies are overwhelmed with the evaluation and targeted use of data. That is certainly also due to how difficult it is to find the proper experts and to then get them on board to work for a company.

“That is why the goal for all IoT companies needs to be not only to generate data, but to also add value, such as recommendations for action,”

commented blik founder Philip Eller.

Munich: Germany’s IoT stronghold

23 billion euros of potential revenue were forecasted by the consulting company McKinsey for 2020 in the field of IoT. The study views Industry 4.0 and networked cars as the most important fields of application in Germany. Munich is in a good position. The Bavarian capital city is home to important international players like Siemens and BMW, who have also been joined by IBM, Microsoft, Amazon and Google. At the same time, Munich provides a powerful research environment (one example being its own Industry 4.0 Competence Center at the TUM School of Management), capital is available and the startup scene just keeps getting stronger — but does that automatically make us Germany’s IoT stronghold?

“All of Germany’s successful IoT and industry startups are in Munich. There are much fewer in Berlin by comparison: both for hardware and industrial customers, Munich is the focal point.”

How did that come to be? What concrete advantages does Munich offer? For Konux founder Andreas Kunze, it’s quite clear:

“In terms of IoT, Munich is the strongest city in Germany, because this is where users and suppliers meet up.”

It is a fact that Munich, in addition to the successful young companies named already such as sensor-driven LED lamps by ComfyLight, intelligent heat management by tado and the smart scanner glove by ProGlove, has a great deal of additional startups to offer that are active on a global scale. This includes Tacterion, the startup for tactile sensor technology, Bragi with its intelligent earphones, the indoor 3D maps by NavVis, the iOS plugs by Parce known from the German show In the Lion’s Den (DHDL), or the networked fitness equipment by eGym.

From an international standpoint, it could be a major advantage for Europe — and for Germany and Munich in particular — to specifically concentrate on the field of IIoT, or Industry 4.0. For Hansi Huber, founder of the PeaceTech.Foundation, this is where he sees Germany’s key skills:

“We can and love improving processes and employing incremental innovation — and it all can be implemented here perfectly.”

Visions of the future

Of course we also asked what future prospects might lay in IoT in Germany and the direction it might take. One thing they all agree on – for smarter data collection and evaluation, there is no way to avoid IoT.

Aided with artificial intelligence, the vast quantities of collected data can be evaluated to specifically meet customer needs. It will also be a matter of making the processes for data transmission more intelligent; from process to analyst and back to the machine.

In the consumer sector, it is also about making the user experience more enjoyable, for example with Voice Search. The perfected interplay of separate devices is also important. Perhaps it would also be possible to create common standards that would be accepted worldwide?

One thing is certain: regardless of the type of business models that arise in the future – we can’t wait to hear more!

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